Living trusts, also called revocable trusts or family trusts, are not for everyone. There are lawyers who will bombard you with a litany of scare stories, insisting that having a trust is the only way to go. Here are some of the scare stories: Probate is a disaster and takes years; the Government will get your property; you will lose the estate to taxes; and the probate fees will eat up the entire estate unless you have a trust. There may be some truth to all of these, but the answer for you is certainly not a one-size-fits-all estate plan.

What is a Living Trust?

A living trust is a legal entity you set up to hold your assets to avoid probate and in some cases where people have a substantial estate, a trust can be used to minimize estate taxes.

Let’s take a realistic look at some of the issues surrounding living trusts.

Should you avoid probate at all costs?

Not always. If the value of the estate is low, then a small estate probate can be less expensive than a trust.

How expensive is probate?

If an estate goes through probate, the probate fees, including the personal representative’s fee and the attorney fee can be expensive. However, if you are under 60 and healthy, the probate expenses will occur in the distant future, paid by your children, but the cost of paying a lawyer for the trust is paid now by you. A will costs less now, and allows you to invest the saved money for later.

Won’t attorney fees in probate eat up the entire estate?

Valid creditor’s claims, medical bills and unpaid back taxes are much more likely to eat up the assets of the estate than attorney fees and the statutory personal representative’s fee. Attorney fees are paid at the end of the probate, and must be approved by the judge.

Doesn’t a living trust save on taxes?

A living trust will not save your family money on income or estate taxes. A trust is tax neutral.

How do I choose a lawyer?

Not every lawyer gets along with every client and the opposite is equally true as well. It is a personal professional relationship. Choose someone that you think you can get along with, by asking them hard questions up front. Choose someone who has experience, will promise to answer your calls, and someone who will explain their fee structure. Call several lawyers and compare services and prices. If someone will not talk to you on the phone, thank them for their time, hang up and call another.

At what age should you consider creating a living trust?

If you are in your late 60’s, 70’s or 80’s and have substantial assets, sometimes a trust makes sense. Just as often, it does not make sense. Each situation is different. A living trust is more expensive to create, and the savings to your family, if any, will only be realized after death. Therefore, if you create a trust at too young an age, any savings are far down the road, and you are spending money that would be better invested. Money spent on a trust is money out of your pocket now, whereas probate fees are paid out of your children’s inheritances. If you are in your 80’s, the savings to your family from a trust will be realized much sooner, and buying a trust might make a whole lot more sense.

Isn’t a trust easy to administer?

Not really. A Living Trust is not so simple to set up or administer over your lifetime. If you set up a trust, you have to pay attention to it for the rest of your life. All your assets must be legally transferred into the trust for it to be effective. If you leave out an asset, or buy a new asset and fail to put it into the trust, your family could end up with an unnecessary double administration after you die: A probate administration for the assets outside of the trust, followed by a trust administration for the assets inside the trust. A double administration will not save your family money.

Will my family be able to administer my trust after my death without a lawyer?

A successor trustee should get professional advice after the death of the person who created the trust. Sometimes not much needs to be done, but sometimes a lot needs to be done. Let an expert help you. The trustee should make sure he or she does not miss any important legal issues. The trustee is personally liable for mistakes, so hiring a lawyer is useful to make sure the trustee does not get sued later by disgruntled heirs or creditors. Administering a trust in some simple cases can be pretty easy and cost effective, but in other cases a trust administration can be just as costly as a probate. If the plan in the trust calls for the creation of a credit shelter trust after one spouse dies, the successor trustee should definitely hire an attorney to help set up the credit shelter trust after one spouse dies.

What about joint ownership with right of survivorship?

With a spouse, yes. Joint ownership of assets with a spouse avoids probate. Beneficiary provisions on life insurance and annuities also avoid probate. Beneficiary provisions are safe to use. However, please never put your children’s names on your real estate, or financial accounts as joint owners. If your children get sued, divorced, bankrupted or get in trouble with the IRS, your assets might be garnished by your children’s creditors!

Isn’t a trust private after death?

A living trust administration after the death of the creator of the trust is private and is performed informally, outside of the court’s review. This can be very desirable, and is an advantage for high net worth people. However, I have seen situations where unscrupulous trustees take advantage of the informal and private procedures of trust administration to hide assets, and even to steal assets from beneficiaries. In a probate, it is unlikely that a personal representative will be able to steal assets, since the court record shows all of the critical information, and each beneficiary is given a formal right to contest the probate. If you create a trust, only choose the most trustworthy person you know to be a successor trustee.

Frequently Asked Questions About Revocable Trusts

Should I have a revocable trust to avoid probate?

You should have a trust only if you are older and only if you have substantial assets. Revocable trusts (also called living trusts or family trusts) have been oversold to the public by many lawyers. A revocable trust only controls assets transferred carefully into the trust. If this transfer process is not complete, the trust can be worthless. Call me to discuss if a trust is a good option for you. I have put together the following information on revocable trusts:

Revocable Living Trusts (also known as living trusts or family trusts) are often promoted as an effective alternative to probate for transferring property when you die. Even though Oregon’s probate system is among the simplest and least expensive in the nation, many citizens are attracted by the possibility of even quicker and easier asset transfers. But revocable living trusts have some drawbacks. Revocable trusts cost more than wills.

I have heard terrible things about probate.

Many people hear horror stories about the Probate Court process and are urged by friends and relatives to execute a trust. A trust is a complex legal document that can serve various purposes for various people. It is important to determine–on an individaul basis–whether a trust is an appropriate estate plan. To help you decide if a revocable living trust is right for you, here are answers to some of the most frequently asked questions about these trusts.

What is a revocable living trust?

A revocable living trust is a legal device that can be used to manage your property during your lifetime and to distribute your property after your death.

A revocable living trust is established by a written agreement or declaration, which appoints a “trustee” to administer the property transferred to the trust, and which gives detailed instructions on how the property is to be managed and eventually distributed. You should legally transfer substantially all of your property to the trustee. A revocable living trust agreement or declaration is longer and more complicated than a will, and the transfer of assets to the trustee can be time-consuming and expensive. Deeds, stock transfers, new bank accounts, and other legal documents will be necessary. Assets not transferred to the trustee will not be considered part of the trust and might still be subject to probate. You must also have a “pourover will” to ensure that any property not properly placed in your trust before death can be transferred to it after death.

Who can be the trustee?

In Oregon any competent adult can be the trustee, including the person setting up the trust. An Oregon bank or trust company can also act as trustee. Appointing a successor trustee is essential.

A revocable trust avoids probate.

Revocable trusts avoid probate because you transfer ownership of assets to the trustee before you die. The trustee then transfers your assets to your beneficiaries after your death without a probate. If you establish a trust but fail to transfer your assets to your trustee, you will not avoid probate.

If you die owning real estate outside of Oregon, a court proceeding might be required in each state where real estate is located. A revocable living trust can avoid these extra court proceedings only if that property is transferred to your trust.

Sometimes it is not a good idea to avoid probate.

For instance, in a probate your personal representative can limit the claims of creditors to a certain time period, and if they do not file their claims on time, their claims are invalid. However, if a trust is administered, creditor claims may not be time limited, unless a special court proceeding is started, which requires additional time and expense.

Be aware though that some of these non-probate devices can result in consequences relating to taxes, eligibility for public provided long-term care, and loss of independent control over an asset.

I have a large estate. Should I have a trust?

Spouses with large estates may create trusts for each other in order to minimize the estate tax paid to the government before their children receive their inheritance.

One size does not fit all.

Each family requires a customized estate plan. Revocable trusts are not for everyone. One size does not fit all. Call for a free phone consultation about your estate planning.

Oregon Probate, Wills, Trusts

I am an Oregon attorney specializing in probate, wills, family estate planning, and living trusts. I handle probates in all Oregon counties. My goal is to complete your probate as fast as possible while keeping your costs low.